One of the major factors that can contribute to market price fluctuation is housing supply and demand. This refers to the ratio of properties available on the market (supply) and people looking to buy a property within that housing market (demand). When the housing supply is greater than the housing demand for that area, Brisbane property prices will be driven down. By contrast, when the housing demand is greater than the housing supply, property prices are driven up in that area.
When it comes to forecasting housing supply and demand, there are two recognised types of demand:
- Occupant demand: This refers to the number of dwellings that would be required to physically house the entire population of that area (based on size, composition, and behaviour assumptions)
- Purchaser demand: This refers to the number of new dwellings paid for or purchased by different categories of buyers. These are identified as being:
- First home owners
- Changeover buyers (i.e. people who have previously purchased a property)
- Domestic investors
- Foreign investors
- The public sector (i.e. Government)
Over the long term, occupant demand should correspond with purchaser demand (which is equal to the total number of dwellings built), and oversupply or undersupply should only be applicable to the short term. There are a number of contributing factors that can drive up housing demand, such as:
Higher incomes: It stands to reason that when Brisbane’s average income increases, more people in Brisbane have the financial capacity to buy property (whether as a first home, holiday home, or investment property).
Lower interest rates: Declines in home loan interest rates directly increase the amount that the average household can borrow.
Credit availability: Greater credit availability makes home loans easier to obtain and can, therefore, increase housing demand.
Demographics: With growing numbers of Australians having fewer children and either remaining unmarried or getting married later in life, the size of the average household has decreased. What this means is that lone-person- households are increasing, and therefore so is the demand for housing.
Rent increases: High rent amounts can often prompt renters to buy a property instead of leasing one (though it can make it harder for them to save for a deposit).
Tax influences: Certain tax incentives (e.g. discounts on capital gains, negative gearing, or land tax exemptions for owner-occupied housing) can make property a particularly attractive investment option.